FBAR (Report of Foreign Bank and Financial Accounts)
The FBAR is something you’ll want to get familiar with if you’re a U.S. citizen or resident alien with money in non-U.S. accounts. Below will tell you what you need to know to avoid penalties and submit Financial Crimes Enforcement Network (FinCEN) Form 114.
As a U.S Citizen or resident alien living abroad, it’s no surprise that you may have a financial interest in or signature or other authority (banking, pension, investment, etc.) over at least one financial accounts located outside of the U.S. But did you know that simply having financial assets in foreign accounts might trigger special reporting requirements? It’s true, and the main reporting requirement is known as an FBAR (Report of Foreign Bank and Financial Accounts). The actual form you’d fill out come Tax Day is FinCEN Form 114.
The FBAR is an annual report, due April 15 following the calendar year reported. You’re allowed an automatic extension to October 15 if you fail to meet the FBAR annual due date of April 15. You don’t need to request an extension to file the FBAR.
Keeping Records
- The account numbers.
- The name on each account.
- The types of account.
- The name and address of the foreign institution(/s) where the accounts are held.
- The maximum value of each account during the relevant tax year.
The law doesn’t specify the type of document to keep with this information. Documents may include bank statements or a copy of a filed FBAR if they have the required information. Generally, you must keep these records for five years from the due date of the FBAR. If you haven’t filed your FBAR in previous year(s), AOTAX will assist you as we have an expert of teams in all matters related to FBAR filing, streamlined procedure.
Penalties : You may be subject to civil monetary penalties and/or criminal penalties for FBAR reporting and/or recordkeeping violations. Assertion of penalties depends on facts and circumstances.
Filing Delinquent FBARs : Filing an FBAR late or not at all may be termed as violation and may subject you to penalties. If the IRS hasn’t contacted you about a late FBAR and you’re not under civil or criminal investigation by the IRS, you should file late FBARs as soon as possible to keep potential penalties to a minimum.
In addition to Form-114, you would be required to file FATCA If you reside in the USA
FATCA Processing
The Foreign Account Tax Compliance Act (FATCA) is a law that requires U.S. citizens or resident alien holding financial assets outside the United States must report those assets to the IRSgenerally using Form 8938, Statement of Specified Foreign Financial Assets
Who Needs to Comply With FATCA?
Form 8938 needs to be filed by any American taxpayer with financial assets totaling $50,000 or more. Those assets may be in a bank account or may be in stocks, bonds, and other financial instruments.
Individual Taxpayers Living in the U.S.
The IRS requires Form 8938 for taxpayers living in the United States under the following circumstances:
- You are unmarried and the total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year.
- You are married filing a joint income tax return and the total value of your specified foreign financial assets is more than $100,000 on the last day of the tax year or more than $150,000 at any time during the tax year.
- You are married filing separate income tax returns and the total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year.
For purposes of calculating the value of your specified foreign financial assets in applying this threshold, include one-half the value of any specified foreign financial asset jointly owned with your spouse. However, report the entire value on Form 8938 if you are required to file Form 8938.
Penalties for Non-Compliance : There are penalties for failing to file Form 8938. The IRS can impose a $10,000 failure to file penalty, an additional penalty of up to $50,000 if the guilty party continues to not file after notification by the IRS, and a 40% penalty for understating taxes attributable to non-disclosed assets. Criminal penalties may also apply
What Is the Difference Between FATCA and FBAR?
The reporting requirement for Form 8938 is separate from the reporting requirement for the FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR). An individual may have to file both forms and separate penalties may apply for failure to file each form.